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tv   Power Lunch  CNBC  October 11, 2012 1:00pm-2:00pm EDT

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he dealt with the legislature of 87% democrats and he got things done. he did the health care bill, whether you like that or not. he balanced the budget. and people are thirsting for that. i tell you what they're not thirsting for, erskine and i go around the country -- they're tired of bs and mush and they're looking for somebody to tell them the truth. and ryan will do that. joe, i know joe very well but i tell you, the reason they savage ryan, he's dealing with the driver in the engine compartment that can wipe out america and that's health care. you -- that's the engine. it's on automatic pilot. and it will suck up every discretionary part of the budget unless you put the brakes on and that's why they -- >> senator, i want to interrupt you on that. it sound to me that you are not displeased from what you're hearing from your candidates right now. we all agreed at the beginning it was unbelievable they didn't bring up the deficit. paul ryan opposes your plan. >> i know it. >> he dissented.
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>> and so did the president. everybody opposed -- we pissed everyone in america. nobody's doing anything for us. >> at the risk of pissing you off, what would you say to them? >> tell them we have a leaderless government and he can lead. this gentleman can't govern. he's doing politics day and night. >> erskine bowles, same question to you. if had a chance to advise obama and biden on what you want to hear about the deficit and the fiscal cliff, what would you tell them to say? are you not hearing now? >> to lead. lead from the front. just take on this enormous problem we have with economic growth. the best way to take that on is to reform the tax code, broaden the base, simplify the code, wipe out these tax expenditures and use that money to reduce rates, to encourage growth, and also to bring down the deficit.
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that's really attacked these entitlement problems. slow the rate of health care. make social security sustainably solvent. we can't afford to spend more in the next 17 largest countries and then to take that money and some of it invest it and let's invest it in those things that america has to invest in to be competitive globally. >> i would say those same things to the candidate of my party. >> lloyd, has wall street, has business, done enough to push politicians towards better solutions? >> the answer to that of course, they have never done enough. wall street has been business in general, wall street in particular, finance in particular has been a bit under the gun and i think some reaction and -- shame on us to some extent -- has been to hunker douhunk er down and keep our heads below the parapit. i think we have the experience
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and competence to let people know what the consequences -- political sector will make these judgments and reconcile these different choices but i think we have to get out there and explain what the consequences are. >> which is exactly what lloyd is doing now. i really thank him for doing it. same thing other ceos are doing now throughout the country. we've had about 75 to 80 fortune 500 ceos come together and form a ceo fiscal leadership council to tell these members of congress, let's face up to these problems. like lloyd said, i'm willing to pay more faxes but i'm willing to pay them only if we also put our fiscal house in order and do the smart, tough things on spending. >> one of the things the administration has said is that they want to have a burden sharing, that they feel as if you have to charge wealthier people more money if you're going to cut back on entitlements which affect poor people in greater percentages. is that a compromise that you're willing to make? >> sure. listen, my politics -- i'm probably -- i'm on the left center side of things.
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i don't mind paying higher taxes. i don't mind progressive taxes. but i would say, the economic system has to accomplish at least a couple of things. one is to create, generate wealth, and the other is to have a fairway of distributing it. i'd say the first is a predicate for the second. i don't want to do anything -- i don't want to do anything in the redistribution that tamps down on the generation of wealth. >> well, one of the things that's been criticized for curtailing wealth generation has been regulation and even some of the lawsuits that are out there. there's been a lot of pressure on wall street, a lot of legal actions that have been taken against wall street in the past, just the past several months. do you think those are politically motivated? >> look, it is a political process so politics enters into everything. but look, nothing would suit me more than for all the legacy issues fade away. but the country went through a big trauma. we're a democracy. in some cases you need an escape
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valve for it. i accept the fact we'll have to deal with legacy issues but i would like to spend a higher proportion of our time dealing with the future and with the current problems we face. >> i want to see if i can get one more aphorism out of senator simpson. maybe that's the wrong word. when we're back here a year from now are we going to have a debt deal on the table? is this country going done well along towards solving the fiscal problem or is it going to be worse? >> it is going to be -- you bet c cha because the ax is going to swing and the club is going to come down and people are going to say to their elected representatives, look, i had to pay more interest because you guys aren't doing anything, getting stuck right and left and you did this to me, and now go correct did. >> american people are way ahead with politicians. they know we've got a problem and they want those politicians to stand up and get the job done. for generations we've asked our
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politicians to bring home the bacon. well, the pig is dead. >> we've done this before in our history, steve. you think about -- this current period also gets animal guysed to the great depression and the aftermath. in the great depression, there was a war between the president roosevelt and business interests and you think of all those changes, the trials, the hearings, everything else, the s.e.c.'s creation. all that pressure, accusations that flew. once there was a kind of whiff of a national crisis, war in europe, way before the war, but when people started to feel it, there was a pivot. i remember at the time roosevelt called in people he previously called plutocrats and now are factors of great wealth and they had a meeting and the united states went from a country that had no arsenal at all to within a couple of years being so productive that it cannot only arm itself but become the arsenal for every other country in the world. that was an incredible feat of
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partnership and productivity. i look -- hope that at the end of this election, without having such a grievous national crisis as occurred in the late '30s and the early '40s, that we can get to the same place. >> okay. a great place to leave it. lloyd blankfein, erskine bowles, senator simpson, thank you very much for your time. i guess i'm throwing it back to inglewood cliffs. >> it's scott, steve. thanks so much. i'll take it away thanks to you and of course the three wise men that you've been sitting with for the last 37 minutes or so. the traders are here with me. as steve mentioned, tyler mathisen, sue herera joining the conversation. tyler, beginning with you, many headlines but you could certainly sense the level of frustration in the voice of erskine bowles who said washington still isn't doing anything about the fiscal cliff issue, and a more sobering view about what could happen in the stock market if there is no deal saying the market is priced in that there is going to be a deal. he said it is just not so. >> this was 37 minutes that if you didn't see all of it you
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need to go and go on cnbc.com and watch the whole thing. there was so much common sense and urgency in that conversation, it is not to be missed. on the other hand, scott, one thing i would point out was the idea of opportunity. i believe it was mr. bowles first, mr. blankfein maybe second or maybe i have the order wrong, but they each said if there is a solution put on the table, a deal gets done, can you imagine the stimulus effect that that would have because of certainty, because the problems would be resolved. not just on the stock market, which mr. blankfein said is a separate animal, but on the economy as a whole. the great unleashing of capital that would happen if this problem was solved. and that's the stake here. >> yeah, sue, and not a great deal of confidence from either man today that any deal could be reached. really any time soon. >> indeed. i think mr. blankfein hit the nail on the head when he said in
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reference to the fiscal cliff, that he feels as though the fed has been, in his words, courageous but that there is no remedy from the fed for the nis c fiscal cliff issue if it is not resolved. that to me was a big headline and i hope a lot of congressman and senators out there are listening to that because that to me was the shot across the bow. that to me says if they do not buckle down and get this resolved, do not look to ben bernanke and company to solve the problem. they can't in mr. blankfein's opinion and i think that's an incredibly important warning sign. >> steve leisman joins us now. steve, we were all riveted to you as we were talking to you with the three wise men, simpson and bowles and lloyd blankfein. your biggest takeaway from the interview? >> it's taken on from what sue was saying but on the other side. i love what lloyd blankfein had to say.
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we were talking about the negative ramifications of not solving the fiscal cliff problem. i thought lloyd blankfein was fascinating talking about theit. when you look at the 10-year yield, financing our deficit is not the problem. but when you think about he specifically said goldman is on the sidelines, goldman is preparing for a 2% probability event. you remove a piece of that 2%, and the horizons that open up, those are fascinating to me to think about it and to try to motivate the political process from the positive side, not the negative side. and i'll just listen to alan simpson talk for as long as he wants to go. >> i'm sure you would, steve. as a market participant with the view of what wall street wanted to hear today, lloyd blankfein said in his words, i'd be a buyer of the market on a deal. what's the tradable information we got out of this interview today? >> well, tradable information is that goldman has basically protected their downside, but if
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you were sort of on the fence about goldman, you got to love lloyd blankfein. he comes off as a true ceo, not the darth vader, not the negative picture that some traders want to believe. i like goldman coming out of this because they are prepared for the up side, yet they are protect being the downside. >> josh, take what erskine bowles said, that he believes the market has in fact priced in that there is going to be a deal. reason why the s&p 500 is not that far away from that 4 1/2-year high. how do you see the market? what would you do today and over the coming weeks based on those comments? >> there is a new name that's starting to circulate. you hear a lot of chief strategist types talk about it. the truth being that the two parties aren't that far away on i think 6 out of of the 8 most pressing parts of the fiscal cliff. and so i think he said 30% chance of a resolution. we all know it is not happening prior to the election unless we're going to be surprised. but something between early november and the end of the year would be splendid. obviously.
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but i think the closer it comes, the better that augers for a good fourth quarter and good end of the year for markets. >> stephanie link, for the second day in a row have you a major financial institution ceo speaking out about the fiscal cliff. yesterday it was jamie dimon down in washington before the council on foreign relations saying that the fear of the unknown is causing business to pull back. he said had simpson-bowles been enacted, the economy would be booming right now. now you have these two gentlemen, blankfein and dimon, joining the fray, if you will. how do you see it now that you've got these two guys trying to move the ball forward? what would you do in the market? >> i do think it is interesting that lloyd did also say the same thing in that they would be spending as a company more. they would be investing more. they would be financing more if there was a deal. so to me, if we get anything at all, i think he's spot-on in terms of the market just going to new highs and beyond because you have this pent-up demand.
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and even -- i'm not sure if it was simpson or bowles, but talking about companies hoarding cash. we've been hearing that from a lot of companies but the reality is that's what's going on. >> hey, scott? >> you know, what the sausage is being made, when they're all negotiating all of this on capitol hill, it is not going to be pretty. there are still some very big differences out there. when you talk to guys down here on the floor, they're very nervous about the process of resolving the fiscal cliff and the volatility that that could bring in to the market. when you do hit some of those headwinds. maybe they will ultimately resolve it, but getting through that process might create an awful lot of volatility for the market. >> sue, i think you're 100% right because what the market doesn't like are these random headlines that come from various party operatives or people who claim to speak for them and certainly that's not going to be a fun process, even if the outcome's closer than we think. >> i want to bring up one point coming off of what stephanie was saying, which is when blankfein talks about the up side of doing
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a deal, he's also talking about the opportunity cost of not doing a deal. the question is whether or not both sides can internalize that opportunity cost and does that lead them to compromise. so would republicans be more willing to accept higher taxes because you know what? at the end of the day when i accept those higher taxes which they see as a negative, i get some of the opportunity costs back of not doing a deal. same thing with democrats on the entitlement side. i'm wondering if the blankfein line of thinking, if the idea that the ceos are now involved and really if they do act together as erskine bowles suggested as a force, 75 to 80 ceos working, if that's enough to motivate congress. >> we'll certainly see if it can move the ball forward. much more of our conversation on the other side of this break. "power lunch" will pick up the ball. tyler and sue will have much more on this riveting conversation we heard today with those three men over at goldman sachs. [ male announcer ] the 2013 smart comes with 8 airbags, a crash management system
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good afternoon. with this special edition of "power lunch," it is the exclusive interview of the day. steve leisman sitting down just moments ago with goldman sachs' lloyd blankfein, alan simpson and erskine bowles of the bowles-simps bowles-simpson. sue herera is downtown. >> we did get some reaction from the market to those comments,
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we're up 35 points on the dow jones industrial average. if we can hold where we are we will close in the green. first time we would be able to do that this week. dow is off its best levels of the day still trading higher by almost 40 points. we'll look ahead to the close in just a few minutes. we want to begin with steve leisman's exclusive interview with mr. blankfein, simpson and mr. bowles. we have complete coverage with our reporters and our guests, ty. >> that's right. it was a fascinating discussion on taxes, the role of government, the state of the economy, not just the united states but globally, and it comes of course on the day of the vice presidential debate. let's start with politics. you went right at the fiscal cliff. let's listen to what they said. >> if we do nothing, next year, you'll have the rate of growth slowed to somewhere like 3% to 5%. you'll have unemployment go up another 2% to around -- above 9% and 2 million more people will lose their jobs and we're doing nothing about it.
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>> it is very serious. i think the candidates know how serious it is. i think they're trying to avoid it, maybe in part because it is so consequential and serious and maybe the ideas that would have to be put forward will be unattract i have to some people. obviously we're in a position where new discipline is going to have to be imposed, people will be disappointed in the consequence so i think they're going to avoid it. >> they worship, said alan simpson, at the god of re-election. i would emphasize what mr. blankfein said there, the candidates seem in large part to be avoiding the consequences of fiscal cliff precisely because it is so consequential. do you see it that way? >> well, not exactly, tyler. let me make a couple of points. first of all, sometimes a bunch of issues get conflate wd when talk about simspson-bowles and the fiscal cliff. if we go over the fiscal cliff there will be a huge reduction in the debt and deficit.
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if that's the sole concern of policymakers we'd just go over it. we're not going to go over it because, a, they are concerned about growth, they are concerned about the impact on the economy, and the set of circumstances that are going to come together at the end of this year were designed specifically to make them so unpalatable that they won't. so erskine bowles knows why they're not doing anything now, because we've got to have an election to settle who's going to be in charge. the other aspects of balance that you heard about explicitly from lloyd blankfein saying, yes, i'm ready to pay higher taxes if they'll cut entitlements, implicitly from l alan simpson that he'll reach out to romney. what that means in this context is support some tax increases because that's what's necessary for a bipartisan deal. from president obama's point of view, he's embraced that. he almost negotiated such a deal with john boehner. it didn't happen. if you want to criticize obama
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for during the campaign, he hasn't really spelled out exactly what he's willing to do on entitlements. he did to some degree behind closed doors with john boehner by hasn't repeated some of those things in the campaign. bottom line is, i don't think we're going over the fiscal cliff. i think there is recognition of what these men are talking about. the only question is going to be do we have a configuration of leaders at the end of the year coming out of this election who can come together on both sides of what's necessary, entitlement cuts, tax increases. >> josh voback to what john hars saying, senator simpson was very frustrated, i think, and he has been before, about the grover norquist pledge that so many house republicans have signed. is that ultimately the kind of impediment to a deal that is absolutely insurmountable no matter who had's in the white house? >> that's one of many impediments. you have to think about what they're talking about is being
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as shaean connery trying to sne into alcatraz on the rock. you still have to face the democrats on medicare. you have to ensure you have sustainable economic growth. all of those are problems. we know on the tax issue that grover norquist has specifically said simpson-bowles is a tax increase. his organization sent out messages to that point this week. we know that nancy pelosi, the house minority leader, has focused extensively on preserving medicare saying if there are changes to it, in some major capacity as republicans are proposing, grandparents will end up on those basement sleeper couches instead of nursing homes. >> steve, let me turn to you and turn it the other way and pick up on the comment that you made during "fast money." there seem to be a very decided effort by mr. blankfein, one to warn about the dangers of the fiscal cliff, but to emphasize the positive aspects of if we do indeed come to a resolution, the opportunity aspect of it.
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could you elaborate on that and why you think perhaps he chose that particular way to go? >> so what's interesting about that, sue, just as an aside is that there is some behavioral economics research that shows people respond better to positive reinforcement than negative reinforcement. i don't know if lloyd blankfein was picking up on that. but we always talk about the fiscal cliff in terms of the downside. here's the calamity that will ensue if we don't solve our fiscal cliff problems, don't solve the deficit problem. what lloyd blankfein made very plain from actions of the company that are being taken now or would be taken is the up side of solving the problem, which is that if you were to -- if there were an announcement tomorrow in the papers that -- or on cnbc, of course, that there was a deal, this would cause his company to begin to invest, he'd be a better buyer of the market here. there's all these things that we're leaving on the table. there's up side to growth. there's up side to the market. frankly, i don't think either party -- or many people have really thought about it in those terms. i thought that was a refreshing way to think about it.
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>> in other words, steve, he was administering a little bit of psychological therapy not only for his colleagues in business and on wall street but also for some in politics as well. >> i think so, john. john, that was a key question to me, is a republican or democrat more likely to make a compromise on essential tenet that they hold because they know that there's some up side here to that compromise that offsets the negative that they see from what they don't want to happen. >> mary thompson though, this is a role that we don't often see lloyd blankfein in. one could almost use the word statesman like when he was making those comments. talk to me about your impressions of what he said and how he appeared in this particular panel. >> well, i think as everyone has pointed out, he was very statesman like, very i would say reasoned and balanced in his approach in how he'd deal with the issues, not rush to anything but phase in some of the needed cuts and increases over a long term. i do want to go back to something that steve was saying and something that i took away from mr. blankfein's comments, that at this point not only
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would it be an opportunity for his firm but it is an opportunity for the u.s. economy. the rest of the world is in troub trouble. if we get our house in order, that kind of re-affirms the u.s.' economic dominance, something that should appeal to both parties. so as he said, wall street may have been wrong in keeping their head, you know, down behind the fox hole because they were concerned about some criticism that they might have had in pointing out what could be the negative consequences, but obviously he feels this is the time to step forward and be more vocal about it. >> folks, steve raised the question of where the fed comes in to all of this discussion about the fiscal cliff and what it's been doing to try and stimulate the economy. i want to listen to part of that exchange right now and get your reactions. >> i think the fed is being very aggressive and i think courageous in doing what they can. there's very little monetary tools left. but you know they have a mandate and they're deploying all that they have but there's nothing
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that will allow the fed to compensate for a total a abdication of fiscal responsibility. >> steve, your reaction to that. the fed obviously doing what it can and chairman bernanke basically in some congressional testimony has said i'm basically doing what i can, guys, you've got do your part. >> blankfein was essentially quoting the chairman himself who said we cannot offset the effects of the fiscal cliff. i asked him about that criticism out there that they're enabling some of the deficit spending that's going on. i think what blankfein's response was that the fed has no choice here and to an extent it is doing that. he didn't seem to disagree with it very much. >> another thing i thought was an interesting and sort of telling statistic here, you asked if interest rates were at their normal historical levels, what kind of hole would that blow in the deficit, and mr. bowles had the number at the tip of his fingers. he said it would go from $230
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billion in interest expense now to $650 billion in annual interest expense if interest rates were where they typically have been. >> tyler, you put your finger on what's the real concern right now about the level of the deficit, which is, as everybody says, the deficit is not a problem until it is. how does it become a problem? interest rates normalize. of course there's some term structure to the debt. doesn't all hit us at once but in essence that's where the rubber's going to meet the road right there, is in interest expense when it should normalize -- which everybody expects it to do -- what's going to be the total interest bill of this country. >> let's wrap this up by going around the horn and seeing what you all think. steve, i'm going to start with you. the question to all of you is whether or not we end up going over the fiscal cliff. steve, yes or no. >> i say no. >> john harwood? >> no or if we do, for an extremely short time simply as an action forcing mechanism. we are not going to
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experience -- >> that's a hedge. >> no, no, it's not a ledge. could you go over it for a few days or a few weeks. but no, the full-blown consequences of the fiscal cliff will not happen. >> josh? >> it's going to be a drop but likely a brief one. >> all right. mary thompson? >> i'm with john -- short time. short term. >> okay, thank you all very much. we're going to taget the wall street reaction to all of this when we come back down here live at nyse and back in inglewood cliffs with tyler. "power lunch" continues in two with the dow jones industrial average up 30, s&p up 5, nasdaq up 4 and russell up 3.78. over three and a half tons.id small in size. big on safety.
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welcome back to "power lunch." i'm sharon epperson here in the gold trading pit. traders here have also been focused on our discussion about the fiscal cliff over the last hour, and they say that gold prices will be supported here as long as there's no resolution to this fiscal cliff. instability and uncertainty of course is something that a lot of investors who want to hedge their bets look to gold for. right now we're looking at gold closing right around basically unchanged territory. yes, last week we did try to make a push to the $1,800 level
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but hsbc's jim steele says the path of least resistance right now looks to be lower because gold has been unable to break through that level. we'll continue to watch whether we get back to those high and in terms of other metals, keep your eye on copper. copper is the biggest gainer on this session but those gains may be limited as of course we are seeing so many reports about the slow growth coming out of china. back to you. >> thanks, sharon. let's go to bob pisani here with me on the nyse floor. >> 3-1 advancing to declining stocks. narrow trading range but a lot of action today in the energy sector. morgan stanley making a very bullish call on natural gas earlier in the morning. they're talking about $5 gas as a possibility here. you see all the nat gas stocks up. demand has been elevated. inventory is moving from a surplus to a deficit. they talk about for natural gas stocks. interestingly this is also moving coal stocks to the up side. why would coal stocks move on this? remember, there's been a lot of switching from cold to natural gas recently. you might slow that down. might see that slow down if the
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prices continue to rise for natural gas. sue, you are getting a twofer, nat gas stocks and coal stocks both up. >> can't beat that. to the nasdaq now, seema mody. >> sue, we are losing some of the gains that we initially had in today's session. nasdaq is up barely two points. our large cap focus of course here in tech. apple down about 1.5%. that's a stock we continue to focus on. on an alternate note, some of these pc stocks, after hp took a nose dive in last week's trade, seeing a pop today up .7%. traders are putting a lot of focus on the bio ttech ipo activity. focusing in on ckythera, it is biofa farpharmaceutical firm. working on a development for
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elimination of double chin fat. kenny, you heard our discussion about the fiscal cliff. you were pacing back and forth and had a lot to say about the various things that were coming out of that discussion. what struck you the most? i thought it was a tremendous conversation. i also like the way lloyd blankfein tried to paint it in the positive. here what's frustrating. politicians have to be able to see it. do they not understand what the economic benefit would be by making a deal? the fact that there isn't is what's frustrating to most american people. certainly american ceos as we can see that. i think it is unbelievable. it is great they're all coming together now. i think we are going over the edge because we're going to have the election, then you got a lame duck government and nothing happening for four weeks. i think we're going over the edge. whether we go over for a week or two weeks, it doesn't make a difference. we've gone over -- >> that's the question. >> we've gone over.
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then what are they going to do, put a band-aid on it and say this is what we're going to do? i think they're going to miss their opportunity. i think senator simpson said just the news effect of the politicians saying we've reached a deal -- whether or not they've ironed it out. fact this they've come together and said we've reached a deal would be tremendous for the markets, tremendous for the economy. >> the headline risk is what a lot of people down here are worried about, matt. are you as concerned about that? we were talking about this on "fast money" earlier. you do have some of the representatives and their representatives come out with headlines that have the potential to whipsaw this market as we work through what could be a very messy process on capitol hill. >> right now we've got slowdown in washington as it is for campaigning. they're not doing anything right now. the point is we've seen timelines come and go. we've seen it in greece, europe and all over the place. doesn't really matter. we're going to come down to we're going to solve this thing for the short term, slap a band-aid on it. like kenny said. it is becoming a joke. i think we're immune to it now
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down here, honestly. we're still touching five-year highs so obviously we're not that concerned about it. >> what are you concerned about then? is it europe? is -- >> i'm concerned about a lot of things. i'm always bearish. however, the market doesn't come in, they're not showing it. we keep talking about oil. oil raises its head over $100, it's panic, we're done. i really don't know. i'm immune to it all. >> i think it is frustrating. they made the point that they think the market is pricing in the fact that they are going to come to an agreement and we are neat going over the edge. i think that's a wrong assumption to make. i tend to be more like you. i tend to be much more concerned and i think they're not going to make it. listen, we've been talking about this for how long? last year when we didn't come to that agreement, they had 12 months, what are they going to do it in the last four weeks of the year? >> some people feel that deadline pressure will do that. >> it is a lame duck government. if somebody doesn't get re-elected, they're going to go -- i don't care, i'm not
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re-elected. >> lloyd blankfein along with those other two esteemed gentlemen. is the power of a group of ceos to that stature enough to motivate those in washington to perhaps work? >> i don't know what motivates the guys in washington. certainly not what they've been asking for. they've been under pressure for some comments that jack welch made on friday about the jobs number. they're under all kinds of pressure from that. i'd like to see jamie dimon and lloyd blankfein. those guys are smart guys. they know business. they know what we'll need to turn this economy around, get jobs involved, get people investing back in the economy. that's what we need washington to hear. >> interesting. nobody wanted the treasury secretary job. >> right. nobody wanted it. but i think you're right, i think it will take men like that -- and women. ceos from around the country to come together and go down there and tell this story. we're already hearing announcements where companies are concerned, hoarding cash because they don't know what's going to happen come january 1st. >> what do you do in the market then against that background? >> i think you have to remain
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cautious. i think we'll get 1,470, 1,460 is going to be the highs. i think you have to be cautious. >> matt? >> sell everything. >> okay! on that note let's go to rick santelli. maybe that's what they were doing is selling everything and going into the bond market because we had $13 billion in 30-year bonds up for auction today. we've had two aa auctions today from rick santelli. how did we do today? >> let me see -- think lassie here! we gave it a d-plus. "plus," i was in a good mood. look at the intradays of 10-year and 30-year. you could clearly see at 1:00 p.m., they upticked in yield, downticked in price but that didn't last long. it's back to old-school hockey. after all the supply is done, we did the u-turn and interest rates rallied pushing yields down. so we saw a 1.71% yield which turned in to 1.68%. we saw 1.91% year on the
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30-year. it certainly seems as though the rally was the tail wagging the dog on the treasury side. that put a little bit of question mark in the up side of stocks. sue? it's all yours. >> thank you very much, ricky. "l" for lassie. yikes! let's gr o to bertha coombs. >> watching oshkosh. the company issuing a statement to shareholders saying not take any action. carl icahn this morning issuing an unsolicited tender offer of $32.50 a share. they say they'll get back to shareholders within ten days. meantime though, interestingly navistar is up on some speculation that maybe this will help carl icahn bring the two companies together. >> bertha, thank you. some people say that this market needs james bond. we're going to pose the question -- what does james bond tell us about the health of the luxury market? the ceo of omega will join us whether we come back.
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well, you heard lloyd blankfein talk about the global economy. today there are new fears about a slowdown over in china. check out its currency. yuan at its highest level against the u.s. dollar in 19 years. it is extremely close to the upper end of its permitted trading range. many companies have bet big on china, especially on the high end, the luxury market. our wealth editor robert frank is here with more. >> thanks, tyler. well, china has been the lifeline for the luxury industry through this recession but the country's love of luxury may be cooling. look at this chart. revenue growth for luxury companies has fallen by more than 50%. now at 2009 levels really near the crisis. also concern maybe chinese wealthy and their overextension. millionaires in china are now spending twice as much on luxury as millionaires in europe or the u.s. more than $22,000 a year. now economists say that level of spending by these millionaires may be unsustainable. this could be a temporary pause
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in china but signs are that the chinese wealthy or what i call the ka-ching dynasty may be cutting back on their bling. tyler? joining us here to discuss the state of the luxury retail market, the president and ceo of omega, which, by the way, is the official watch of james bond. welcome. more about mr. bond here in just a moment and how he likes his watches. i assume he likes like shaken and stirred, but let's talk a little bit first about the state of the luxury business around the world. start with the u.s. tell me about europe, and then most pointedly about china. how's business? >> okay. well overall i would say the u.s. -- you picked a very good choice there. u.s. very happy. we decided on a policy two years ago to open retail stores there. we had a fabulous presence there. i think overall with olympics we just had london which was very
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well viewed here in the states. i think we're on the right track. i feel that in america there is a certain resurgence in optimism. i won't go so far saying luxury spree spending but certain optimism, definitely. >> how about europe and then asia? >> europe is a little bit of a mixed bag. the uk which on paper is going through a bad time where business is very buoyant. not just london for tourists but across the country. obviously the big cities that are visited by our asian and even i would say south america and russia and middle east and france like paris, geneva, london, rome, i think the business is very buoyant. overall, omega is situated pricewise, our level, we are very, very happy. >> robert frank, i'm a proud omega wearer myself. but a quick question. they did so the surveys in china. they're saying that half of the luxury consumers in china and hong kong are planning to spend
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a lot less on watches over the next year. how do you read the -- not just the money that's in china right now -- and there's less of it from real estate and the smasht smashtock market -- but also the mindset? >> the mindset is something else. chinese have proven they have great resistance to difficult times. we saw that in 2008 and '09. i think i don't have those figures that you saw regarding the sales affected in china at all, by the way. i still think there is a big interest on how the chinese choose for fine product with a cultural history, with legacy, with a certain dream. talk about james bond before. it is all about dream. think that the chinese are no different than anybody else as far as that's concerned. >> let's talk a little bit about james bond, whom you outfit and have outfitted in watches since 1995. in this upcoming movie, ask t the -- "sky fall," you have done
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a tie-in with the movie under which you're going to sell 5,000 007 watches? >> every time we do a limited issue. we have the watches bond is wearing which is called actually the bond watch. if you walk in the store and say i want to buy the bond watch, that's on your screen now. then we made limited edition with a facial dial and 007 instead of of the number 7. we've made 5,000 007 watches. we feel that's the right figure to cover our world distribution and to have enough pieces without being too much. >> what does the watch cost and why do you need to do this kind of tie-in? >> we don't need to do it. we have a whole bunch of people out there who will buy every year who just love bond aficionados. i think they're dreaming and trending to have a bond watch. i think it is nice we put one on the market for them. it is not a necessity. it is not a contractual -- a need at all. it is just something that we feel is good and appreciated by consumers. >> the blonde bond will be
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wearing one and the price is what, roughly? >> the price is about $6,500 u.s. >> thank you very much for being with us. he's the ceo of omega. we appreciate it. bertha coombs now has a market flash for us. >> shares of clearwire today have tripped up those single stock circuit breakers because the stock just keeps going higher. david faber reporting earlier today that sprint is interested in taking a stake in clearwire even as sprint is soliciting a stake from softbank to take a stake into that company. clearwire here at a six-month high. >> thank you very much, ber that. the vice presidential debate is on tap tonight and the branding wars are in full effect. jane wells is live in los angeles with one that may not be going all that well. miss jane? >> with all the questions facing the country, you heard from simpson-bowles and the debate tonight -- is one of them which pizza do you prefer? when branding creates its own debate when we come back. [ mal] this is karen and jeremiah.
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welcome back to "power lunch." we've been watching shares of apple. fell below $630 here for the first time since back in august. if it were to close below $630, it will be the first time since
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august 10th, and that mashs the august lows for apple as well. it is an area that technicians are watching very closely. apple, of course, big component in the nasdaq composite and the reason why the nasdaq composite is negative today. >> thank you, bertha, very much. now to the housing market. some new foreclosure numbers show filings hit a five-year low. but the story is within the story, and that is the shift in where those foreclosures are happening and what it means for all of those investors hoping to cash in on those distressed properties. cnbc's diana olick has been looking at those numbers and the map for us as well. hi, diana. >> hey, sue. it is a shift investors should pay serious attention to because folks, your profit center is moving east. some of the formally hardest hit states are going up, squeezing those investor margins. foreclosure filings in q 3 are down dramatically in california, arizona, michigan and georgia. these are states where foreclosures don't need to go before a judge so they've been moving very quickly and
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investors have been inhaling them, pushing prices higher. buying in to price recovery -- well, not so profitable anymore. but, on the flip side, you're going to get better deals and bigger profits in states that are seeing foreclosure spikes. states where you need the judge and where huge backlogs are now finally moving. new york, new jersey, florida, illinois, seeing double and triple-digit percent jumps in foreclosure activity. investors will find more supply at lower prices. now investor demand has driven supplies on the low end down out west dramatically. zillow reported supplies of the biggest california homes down 43% from a year ago and that is squeezing those much-needed first-time home buyers right out of the market. also pressuring the investors. for more on the blog, realtycheck.cnbc.com. tyler, i joined the facebook. go like it, get all the real estate news you ever wanted to know. you know the story by now
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promising fee pizza for life to whoever asks the presidential candidates if they prefer sausage or pepperoni as their chosen topping. but the move is now turning into a pr nightmare. jane wells live in l.a. with the latest. jane? >> reporter: well, tyler, overall, no matter who wins the election, corporate america hopes to win the pr campaign. ♪ >> reporter: whether it's pizza, skin care, airlines, they're all trying to hitch their marketing star to the election without getting political but it carries risks. >> if someone asked the question about pizza during the next debate on october 16th, pizza hut will supply them with free pizza for life. >> yum!'s pizza hut wanted to have fun with the debates which are good nights for pizza sales offering someone free pizza if they ask one of the candidates next week whether he prefers pepperoni or sausage.
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>> this is actually our first big foray into the political environment so it's kind of unchartered territory for us at this point. so far the reaction to this idea has been fantastic. >> well, the chain got a lot of heat for trying to insert itself into the debate, "dear pizza hut, you're not helping," is the title of the slate.com editorial. the giveaway is still on but the company tells us it's stopped promoting it, asking people instead to express their opinions on pizza online. later on street signs -- obama or romney. the coffee cup wars. we'll have that. >> reminder, cnbc's going to carry the vice presidential debate tonight. it will be live, of course. our coverage will begin at 7:00 p.m. eastern on "the kudlow report" and continue on through the evening. the cnbc twicker will be live on debate night. use #cnbc2012 for a chance to
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see your tweet roll on the twicker. today's yahoo! finance poll we asked -- how big a threat to the economy is the fiscal cliff? 13% say it is overblown. economy's getting stronger. 67% say it is serious. serious enough to push the country back into a recession. 20% say it is a problem. but i'm more worried about earnings and europe. coming up next, in that cnbc exclusive interview, goldman's lloyd blankfein sketches out a few scenarios in washington does get its act together, what those outcomes mean for your money. mike rowe here at a ford tell me fiona, who's having a big tire event? your ford dealer. who has 11 major brands to choose from? your ford dealer. who's offering a rebate? your ford dealer. who has the low price tire guarantee... affording peace of mind to anyone who might be in the market for a new set of tires? your ford dealer. i'm beginning to sense a pattern. buy four select tires, get a $60 rebate.
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from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again. we briefly moved into negative territory a few minutes ago on the dow jones industrial average. we have bounced back up but we're only up six points on the session. s&p is up about .1% or so, or two points. we're negative on the nasdaq by 2.33% and the russell 2000 is up 2.28%. your headline from the discussion, what did you think was most important from the discussion between the three gentlemen at the top of the
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show, mr. simpson, mr. bowles and mr. blankfein? >> bowles had a great comment. he said this is the way to look at the deficit. every dollar that we use -- spend for all of our wars is borrowed. that's a great way to get the idea across to the people how serious the deficit problem is. mr. simpson had a great comment. he said we used to think that no congress could be this stupid but i think we were wrong. i'm paraphrasing a little bit but they're putting some pressure on them now. >> i think they're being joined by a number of ceos around the country. the question is whether or not in this type of election year the pressure that is on congress and senators -- i don't know whether it is going to do any good. >> did lloyd blankfein look comfortable or not? i have not seen him look so relaxed. >> speaking of mr. blankfein, folks, i thought it was very interesting when he said i'm more worried about the next five months than i am about the next five years. on that he seems relatively optimistic. he was more optimistic maybe than we might have anticipated on europe. he thought china had had
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